November 03, 2017

January 12, 2018

April 23, 2018

A scheme to award a multi-million-dollar no-bid subcontract to provide security in Iraq during the cleanup of munitions has put the spotlight on the federal False Claims Act and raised concerns among states, including Indiana, that a narrower interpretation of the long-standing statute could impact their ability to recover in whistleblower complaints.

The case, Cochise Consultancy, Inc., and The Parsons Corporation v. United States of America ex rel. Billy Joe Hunt, 18-315, is scheduled for oral arguments before the U.S. Supreme Court March 19. Coming from the 11th Circuit Court of Appeals, the case caused a split in the 4th and 10th circuit courts over a 30-plus-year-old amendment to the statute of limitations provision in the False Claims Act.

Indiana has drafted and submitted an amicus curiae brief to the Supreme Court of the United States on behalf of a 20-state coalition. The states, which include Louisiana, Pennsylvania and California, are urging the justices to adhere to the plain text, which gives a broader reading of the provision. This, they argue, better enables them to recover, deter and remedy fraud, particularly in Medicaid programs.

The case began when Billy Joe Hunt filed a Qui Tam action alleging his employer, The Parsons Corporation, along with Cochise Consultancy, Inc., submitted fraudulent claims for payment to the United States. According to the 11th Circuit ruling, Hunt alleged that through conspiracy and bribery, Cochise was awarded the job of furnishing security services while munitions were being cleared.

However, Hunt claimed, another subcontractor, ArmorGroup, was originally selected for the job. As a result, Hunt alleged, from February through September 2006, the government paid Cochise at least $1 million more each month than would have been paid to ArmorGroup.

Hunt, himself, was convicted in a separate kickback scheme, but once he was released from federal prison in November 2013, he filed an FCA complaint against the contractors. After the federal government declined to intervene, Hunt’s complaint was unsealed. The contractors moved to dismiss, arguing the claim was time-barred by the six-year statute of limitations.

Under the False Claims Act, 31 U.S.C. 3729-33, civil actions must be brought within six years of the fraudulent act or three years after a federal official knew or should have known about the violation. No claim can be brought after 10 years.

Cochise and Parson contend that because the United States declined to intervene in this case, the statute of limitations cannot be lengthened by three years. This argument reflects the rulings from the 4th and 10th circuits.

Fisher

The states counter the three-year provision applies once the complaint is filed and is not dependent on whether the federal government intervenes. Indiana Solicitor General Thomas M. Fisher said the plain reading of the FCA’s text supports the states’ position. Specifically, the three-year language does not include the requirement that the government be a party.

With the federal government recovering $2.8 billion in FCA settlements and judgments, primarily involving Medicare and Medicaid programs, a decision against Hunt could have a real financial impact.

Also, Fisher explained such a ruling could curtail the number of FCA claims and, in turn, the amount of taxpayer dollars recovered. Having private citizens pursue whistleblower claims on their own alleviates some of the pressure on the limited resources of federal and state governments.

Private individuals are incentivized to file FCA complaints through their ability to reap a portion of any money recovered. But if the statute of limitations is narrowly read, citizens might not be willing to take on the investigation and discovery work if there is less chance they will be able to get a financial reward.

Consequently, FCA cases might decline because attorneys general would not have the resources to investigate every alleged bad act.

The case was brought to Fisher’s attention by the Indiana Attorney General’s Medicaid Fraud Control Unit, which highlights additional concerns with a narrow reading of the FCA. Because the public insurance program is administered jointly by the federal government and the individual state governments, the states will get a share of any funds recovered through a whistleblower complaint.

Moreover, many states, including Indiana, have their own version of the False Claims Act in state statutes. How narrowly the federal statute is interpreted could influence how the states’ statutes are viewed.

Indiana’s brief is one of the few filed in this case. After getting confirmation from the respondents that they would welcome a brief in support of their argument, Fisher said, the Hoosier state reached out to gauge the general interest around the country. Then, Kian Hudson, deputy solicitor general, undertook the bulk of the drafting.

Fisher will not be able to travel to Washington, D.C. to attend the arguments. But, he said he hopes the Indiana brief convinces the justices to uphold states’ argument.•

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Marilyn Odendahl covers the Indiana General Assembly as well as law schools and bar associations across the state for the Indiana Lawyer. Prior to joining the Indiana Lawyer, she was a reporter for nearly eight years at The Elkhart Truth, in Elkhart, Ind., where she primarily covered business. She holds degrees from Ball State University and the University of Louisville.